WILLMAR -- The Willmar City Council has received a proposal to resolve the possibly of a lawsuit over the controversial Westwind Estates Third Addition housing project in southwest Willmar.

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Project developers, Southwest Minnesota Housing Partnership of Slayton, say they believe the city's denial of a conditional use permit for the twin-home project is unlawful and they've threatened a lawsuit.

The permit is required by city zoning ordinance to allow the developers to sell twin homes. The project consists of 22 lease-to-own twin home units, 6 for-sale homes and 6 permanent rental units.

City Attorney Rich Ronning described the two-part settlement to the council Monday night.

Ronning said the possible lawsuit will go away if the council enters into an agreement with the developers to build the project's streets and other infrastructure.

The developers will agree to pay cash for the work. The streets have not been built because four council members walked out of a special council meeting on March 31 to prevent the council from ordering the improvements.

Second, Southwest will withdraw the existing plat if the Planning Commission and the City Council approve a revised plat that changes the project from a lease-to-own twin home project to a strictly twin-home rental project.

The settlement was first discussed by Ronning during a 22-minute closed session that was convened by the council after other business on the agenda had been handled. Ronning then discussed the settlement for council members and about 18 citizens and the Tribune who waited for the open session to reconvene.

Ronning said the proposed settlement was worked out by the developer's attorney and by attorneys appointed by the League of Minnesota Cities Insurance Trust to represent Willmar.

The agreement requires the Planning Commission to approve the revised plat at the next meeting on May 19. The meeting will not be a public hearing, Ronning said, because the rental proposal is allowed -- and no conditional use permit is required -- within the zoning district where the project is proposed.

Ronning said the settlement removes the dispute over the 60-day appeal period.

Also, the council will be required to approve the revised plat and order the street improvements at the next meeting on May 19.

If the city meets those conditions, the developers will completely release the city for any damages for previous actions or inactions of the city up to and including the date of the settlement agreement, said Ronning.

"That's where it stands right now and we would expect that the plat will go to the Planning Commission as mentioned and return for City Council final approval two weeks from tonight,'' said Ronning.

There were no comments by council members.

In an interview, Ronning said the city about two weeks ago received a copy of a summons and complaint, which the developers were going to serve on the city if an agreement could not be reached. If the dispute wasn't settled, the summons and complaint would be served, he said.

The 10-page document, in its third draft, covers "all kinds of different facets of action that could be brought against the city,'' including request for damages as well as orders mandating construction of the street improvements, Ronning said.

"This proposal to resolve the case is the result of negotiating to bring it to a conclusion without having to go to court and spend thousands of dollars to defend that litigation and even possibly end up losing, at least to damages, which could be extremely expensive to the city,'' he said.